Bolstering the eurozone’s bailout fund would reassure the markets as many financial players do not believe the crisis is over, Klaus Regling, the head of the fund has told a German news magazine.
“The majority of market participants do not believe in the end of the crisis and expect further ratings downgrades of states this year,” Regling told Focus news weekly to appear on Monday.
“More money would actually further calm the markets. Whether it’s right or wrong, it is a fact. Big figures in the shop window create calm,” he added, according to a pre-released copy of the interview.
Meanwhile, according to another German news magazine, Der Spiegel, the German government is ready to drop its opposition to combining the current temporary bailout fund with its permanent successor, due to get up and running in July, to bolster its financial firewall.
Citing government sources, it said the government has come round to the European Financial Stability Facility, due to expire at the end of 2013, operating with the European Stability Mechanism, for a transitional period.
However, it remains unclear how much the bolstered firewall would have at its disposal, Der Spiegel said in an advance copy of its report due to be published Monday.
Two variations on how it would work are under discussion, it added.
The IMF and the United States have called on the eurozone to boost the capacity of the ESM fund from its currently-planned maximum level of 500 billion euros ($650 billion).
However, Berlin has resisted the calls to increase the war chest, arguing that the debt crisis has calmed down and poses less of a threat to countries like Italy and Spain ― the original reason behind establishing the fund.
Eurozone finance ministers meeting in Copenhagen on March 30-31 are due to discuss the issue. (AFP)
